Content Analysis of Integrated Reporting in Malaysia

MAZURINA MOHD ALI1,*, ERLANE K GHANI1, SUSI HANDAYANI2, MARIANA2,

HAN TANTRI HARDINI2

1Faculty of Accountancy,

Universiti Teknologi MARA,

Cawangan Selangor, Kampus Puncak Alam,

42300 Bandar Puncak Alam, Selangor,

MALAYSIA

2Faculty of Economics & Business,

Universitas Negeri Surabaya, Kampus UNESA Ketintang,

Surabaya, East Java,

INDONESIA

*Corresponding Author

Abstract: - The aim of integrated reporting is to provide a holistic view of an organization’s performance and

value creation. This comprehensive reporting framework contains financial, economic, environmental, social,

and governance aspects. In Malaysia, the adoption of integrated reporting shows the organization’s

involvement in promoting accountability and transparency in corporate reporting. By using the Malaysian top

100 publicly listed companies (PLCs), this study gauges the practices of integrated reporting disclosure,

explicitly investigating the integration of the content elements recommended by the International Integrated

Reporting Council (IIRC) Framework. The examination of the integrated reports of the sample of Malaysian

PLCs is done via a content analysis approach. Sampling from 2018 – 2020 data, this study is beneficial to

contribute to the current body of literature on integrated reporting by shedding light on the ongoing practices of

PLCs in Malaysia. This study has implications not only in advancing knowledge but also increases reporting

practices within business and economics environments. Additionally, it adds valuable insights to the ongoing

discussions surrounding corporate transparency and accountability. Furthermore, the study will present

recommendations for enhancing the content of integrated reports, ultimately strengthening the reliability and

utility of the disclosed information. These recommendations can be used by regulators, standard-setting bodies,

and companies to further develop and refine integrated reporting practices in Malaysia.

Key-Words: - Integrated reporting, Content analysis, Transparency, Voluntary, Performance, Environmental,

Social, Governance, Business, Economic.

Received: July 3, 2023. Revised: February 4, 2024. Accepted: April 5, 2024. Published: May 2, 2024.

1 Introduction

The substantial changes and complexity of the

business and economic environment in recent years,

such as large regional and global financial crises,

unemployment rates, employee welfare, fraud,

climate change, and global warming, demand an

increase in financial and non-financial information

transparency. Traditional corporate financial

reporting is unable to adapt to these advancements

due to various constraints and drawbacks including

the absence of non-financial information, short-

termism, lack of coherence, and complexity, [1].

Consequently, there have been demands for

reporting on corporate social responsibility and any

additional information that may impact company

performance, [2]. However, companies are under

intense external pressure to explain their interactions

with non-financial issues, [3]. Hence, they are more

likely to voluntarily disclose information on

corporate, social, and environmental issues in the

form of stand-alone sustainability reports.

Diverse parties such as regulators, investors,

standard-setters, companies, and other stakeholders

have recognized the significance of integrated

reporting. This is because, when evaluating an

organization’s prospects and risks, they comprehend

that depending solely on financial performance is

not sufficient. Accordingly, it is necessary to have a

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reporting framework that presents a holistic and

practical prospect on an organization's performance

and value creation. The notion of integrated

reporting notably arose, with the establishment of

the International Integrated Reporting Council

(IIRC) in 2010 to drive integrated reporting

worldwide. The IIRC describes integrated reporting

as a broad process of communicating value creation

through continuing integrated reporting. Leading

IIRC is the International Integrated Reporting

Framework (IIRF), which is an essential resource

for understanding the fundamental principles and

critical apparatus of integrated reporting.

Unlike traditional corporate reporting,

integrated reporting incorporates a distinct set of

information. This includes environmental, social,

and governance (ESG) factors. Besides, integrated

reporting also includes the organization's

relationships with its stakeholders. Generally, the

goal of integrated reporting is for organizations to

showcase the association between financial and non-

financial performance metrics. By assessing how

the organizations handle their resources,

relationships, and risks as well as their overall

performance, governance, and strategy, the

integrated reporting supports their capability to

create value in the short, medium, and long term,

[4]. Eventually, as pointed out by IIRC, integrated

reporting is to provide stakeholders with a

meaningful and thorough insight into the

organization's performance, activities, and impacts,

allowing them to make well-informed decisions.

The IIRC introduced an innovative integrated

reporting (IR) Framework in December 2013, to

enhance the adoption of integrated reporting

globally. The comprehensive guide of IR

Framework poses constructive visions, especially to

organizations to make the integrated reporting

realizable. The IIRF contains seven parameters that

cover the current strategies and future expectations

of companies, involving risks and opportunities,

governance, stakeholder relationships, performance,

and value creation. Moreover, the IIRF entails eight

disclosure content elements, which include an

organizational overview, external environment,

governance, business model, risks and opportunities,

strategy and resource allocation, performance,

outlook, and preparation and presentation basis.

Integrated reporting has grown in its widespread

adoption. Furthermore, integrated reporting is

highly valued as an instrument for showcasing

business models, risk management capabilities,

long-term sustainability, and commitment to

sustainable development. Additionally, integrated

reporting enables organizations to make more

informed decisions, promotes transparency, and

permits stakeholders to evaluate their capabilities

and assess the organization's overall performance,

[5], [6].

In Malaysia, integrated reporting has obtained

notable traction. This is because stakeholders

recognize the value of implementing thorough and

more transparent reporting. In addition, the

Malaysian government, regulatory bodies, and

industry associations have vigorously encouraged

the implementation of integrated reporting, in

exertion to strengthen accountability, corporate

governance, and sustainability initiatives. The

Malaysian Code on Corporate Governance has been

established by the Securities Commission of

Malaysia, urging listed companies to hold integrated

reporting to enhance their governance and

transparency, [7]. Also, the Malaysian Institute of

Accountants (MIA) has keenly promoted and

encouraged organizations to adopt integrated

reporting. For instance, regulatory bodies have

performed numerous initiatives to educate, inform,

and assist organizations in their integrated reporting

efforts. Currently, integrated reporting is a voluntary

practice in Malaysia. Various Malaysian

organizations have begun implementing integrated

reporting as part of their commitment to sustainable

development and responsible business practices, [8].

[9], assert that the IR Framework provides a

principle-based approach to guide corporate

reporting practices rather than introducing a list of

standard disclosure items and does not specify the

minimal levels at which certain types of information

should be disclosed. Therefore, it can be observed

that integrated reports, including those that claim to

adhere to the IR Framework, may exhibit

differences in the level of detail provided about

organizations' narratives on value creation. Given

the growing interest in integrated reporting in

Malaysia, it is essential to determine the extent to

which Malaysian publicly listed companies are

incorporating the IIRC's recommended key content

elements. Content elements present a guide to

information included in integrated reports and are

linked to each other. The IR Framework highlights

eight content elements: organizational overview and

external environment, governance, business model,

risks and opportunities, strategy and resource

allocation, performance, outlook, the basis of

preparation, and presentation. By the IR

Framework, organizations need to use the content

elements to explain their unique value-creation

stories by presenting the connections between those

elements. There was no similar study undertaken on

the Malaysian PLCs. Consequently, the purpose of

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this study is to evaluate the content elements of

integrated reporting in Malaysia. To attain this

objective, the investigation will be guided by the

following research questions:

1. To what extent do Malaysian PLCs incorporate

into their integrated reports the main content

elements recommended by the IIRC?

2. How do Malaysian PLCs present their

organizational overview, governance structure,

business model, strategy and resource

allocation, performance indicators, risks and

opportunities, and future outlook in their

integrated reports?

To provide answers to the research questions,

the following list of research objectives was

developed for this study:

1. To determine the extent to which Malaysian

PLCs incorporate the key content elements

recommended by the IIRC in their integrated

reports.

2. To examine how Malaysian PLCs present

various content elements, such as

organizational overview, governance

structure, business model, strategy and

resource allocation, performance indicators,

risks and opportunities, and future outlook in

their integrated reports.

3. To contribute to a better understanding of the

current state of integrated reporting PLCs in

Malaysia and identify areas for improvement

in reporting practices.

This study provides valuable insights into the

disclosure literature by investigating the extent to

which listed companies include integrated reporting

information (such as content elements) in their

annual reports, specifically utilizing the IIRC

Framework. By using content analysis and a

specially developed checklist based on the IIRC

Framework, this study contributes to a deeper

understanding of integrated reporting practices. The

method of in-depth reading and coding used in the

analysis not only improves the quantity but also the

quality of integrated reporting data. Interestingly,

the study reveals that governance is the most

commonly reported element, suggesting its critical

role in promoting accountability and transparency,

which are closely linked to a company's value

creation. These findings have significant

implications for companies seeking to enhance their

disclosure practices.

The subsequent sections of the study are

structured in the following manner. Section 2

reviews the literature that includes the overview of

integrated reporting, integrated reporting in

Malaysia, and integrated reporting disclosure

practices. Section 3 describes the research

methodology. Section 4 provides research results

and analysis. The study concludes with Section 5.

2 Literature Review

2.1 Overview of Integrated Reporting

Traditional business reporting models consist of

separate annual reports, environmental reports, and

social reports, [10]. These reports are typically

restricted to shareholders and fund providers and

serve distinct purposes, [11]. Current reporting

approaches are widely criticized for being lengthy

and complex as well as their limited emphasis on

the financial dimensions of corporate performance,

[12]. The provided information lacks

comprehensiveness in its coverage of business

activities. According to [13], traditional reporting

shows a lack of capability and transparency to

engage with stakeholders successfully. The point of

having traditional reporting is to emphasize the

analysis and evaluation of an organization’s past

and current performance. As traditional reporting

primarily emphasizes short-term and retrospective

performance, it may not offer adequate information

for users who are involved in decision-making

processes, [14]. In contrast, there is a group of

stakeholders who support the combination of both

financial and non-financial information in a

consolidated report, [15], [16].

Furthermore, traditional reporting is criticized

due to its insufficient disclosure of risk and

uncertainty in financial statements, [17]. Moreover,

traditional reporting is inadequate to fulfill the

varied information requirements of stakeholders

especially on the non-financial information, [18].

Therefore, organizations present differently in terms

of environmental and sustainability reporting,

corporate social responsibility reporting, and triple-

bottom line reporting. The lack of standardization of

guidelines for non-financial information disclosure

poses substantial challenges for investors to

compare and assess the performance of different

companies, [19]. Furthermore, the lack of guidelines

standardization reduces the reliability and

magnitude of the information provided, [20].

Besides, it is quite tough for organizations to

prioritize each stakeholder when disclosing

information.

Additionally, the global financial crisis of 2007

to 2009, which triggered the establishment of the

IIRC and the development of the integrated

reporting (IR) Framework, is a means to restore

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trust and financial stability in capital markets, [21].

This IR Framework, which is a guideline for

integrated reporting, expediates the company to

combine all reporting concerns and performance

indicators for stakeholders. Furthermore, the IR

Framework which consists of guiding principles,

content elements, and guiding principles for

assurance and internal control, provides direction

and assists organizations to produce an integrated

report that could efficiently communicate their

narrative of value creation.

The main objective of integrated reporting is to

effectively communicate all-inclusive of an

organization's governance, strategy, risks,

performance, and prospects succinctly. This

communication in the context of the external

environment will lead to the value creation of an

organization in the short, medium, and long term.

Consequently, integrated reporting extends the

reporting of information settings and provides a

wider view of an organization than the present or

traditional reporting model, [22], [23]. By gathering

all appropriate information in integrated reporting,

organizations can communicate their narratives of

core activities, strategy, and performance, allowing

information users to make more informed decisions,

[24].

The IR Framework is a comprehensive

document that is based on fundamental ideas and

encompasses fundamental concepts, guiding

principles, and content elements. The IR Framework

emphasizes the inclusion of all resources utilized by

organisations for value creation throughout their

operational duration, rather than solely focusing on

financial capital, [25]. According to [25], the value-

creation processes are influenced by the external

environment, created through relationships with

stakeholders, and dependent on various resources.

Hence, the concept of integrated reporting

emphasizes the importance of comprehensive and

multidimensional reporting that effectively conveys

the factors that influence the value of an

organization over some time, [26].

The seven guiding principles serve as the

foundation for the development and presentation of

an integrated report. The key factors encompassed

in this framework are strategic focus and future

orientation, connectivity of information, stakeholder

relationships, materiality, conciseness, reliability

and completeness, consistency and comparability,

and materiality. The guidelines emphasize the

ability of an organization to create value over the

short, medium, and long term, [27], [28]. Therefore,

integrated reporting encourages accountants to think

longer term about their business, how they create

value, and for whom, [29].

Finally, content elements serve as a guide to the

information contained in integrated reports and are

interrelated. The IR Framework encompasses eight

key content elements, namely: organizational

overview and external environment, governance,

business model, risks and opportunities, strategy and

resource allocation, performance, outlook, the basis

of preparation, and presentation. Under the IR

Framework, organisations are obligated to adopt

these content elements to illustrate their unique

value-creation stories by presenting the

interrelationships among these elements. In this

sense, it is possible to consider the business model,

which is known as "the core of the organization", as

the first and most significant aspect when evaluating

a company's value-creation story.

2.2 Integrated Reporting in Malaysia

In Malaysia, the development of integrated

reporting has been significantly influenced by

international trends, especially in sustainable

business practices. This is augmented by the

demands for transparency from stakeholders.

Malaysia is committed to fostering accountable

corporate behavior, therefore, the IR Framework is

used as a vital reference for organizations looking to

adopt a holistic and unified reporting approach. The

IR Framework highlights the connection of

financial, environmental, social, and governance

aspects. Accordingly, the IR Framework improved

understanding, exposure, and awareness among the

corporate community in Malaysia, with regard to the

advantages of integrated reporting

The growing global focus on sustainability and

the embrace of ESG principles has sparked a surge

in expectations for Malaysian businesses to be

transparent and informative in their interactions with

stakeholders, particularly investors, [30]. As

investors become more mindful of the significance

of non-financial data in assessing a company's

prospects and risk management, the pressure

intensifies for companies to provide comprehensive

disclosures. This increased demand for transparency

and sustainability reporting encouraged businesses

to consider integrated reporting as a viable approach

to fulfill stakeholder expectations, [31]. Malaysia,

being actively engaged in global sustainability and

reporting initiatives, has adopted integrated

reporting as a strategy to improve corporate

accountability, transparency, and sustainable

practices.

The implementation of integrated reporting is

greatly aided by regulatory and professional

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accounting organizations, as they play crucial roles

in its execution. Specifically, the Securities

Commission (SC) and the Malaysian Institute of

Accountants (MIA) have played a pivotal role in

promoting and supporting integrated reporting to

promote integrated thinking among Malaysian

firms, [32]. The establishment of the Integrated

Reporting Steering Committee (IRSC) under the

MIA on 18 December 2014 was initiated based on

the recommendation of the Securities Commission

Malaysia. The IRSC consists of industry

representatives, namely incorporating individuals

from the accounting and auditing professions, [33].

The primary objective of this committee is to

enhance the level of awareness and promote the

adoption of integrated reporting practices in

Malaysia. Meanwhile, to encourage integrated

reporting adoption, the SC incorporated integrated

reporting in the annual reports into the Malaysian

Code on Corporate Governance (MCCG) in 2017.

Furthermore, by stakeholder theory, organizationthe

management of the organisation must improve and

strengthen communication channels with its

stakeholders.

Bursa Malaysia also plays a significant role in

promoting integrated reporting by requiring

companies to disclose a narrative statement of their

economic, environmental, and social risks and

opportunities in their annual reports and by placing

greater emphasis on the materiality, governance, and

management aspects of organisations, [34]. The

third edition of the Corporate Governance Guide

issued by Bursa Malaysia in 2017 identifies the

motivations for Malaysian companies adopting

integrated reporting, the application steps, and the

anticipated outcome. It was issued for users to gain

a better understanding of corporate governance

practices inserted in the governance code, [35]. In

this context, Bursa Malaysia adopted integrated

reporting in its 2016 annual report and began to

develop a strategic corporate reporting approach. It

enhanced integrated reporting disclosures in its 2017

annual report and released its first annual integrated

report for the financial year 2018. This initiative is

regarded as a platform aimed at promoting the

adoption of the integrated reporting practice among

other Malaysian companies.

According to the International Integrated

Reporting Council, [36], a study conducted in 2018

revealed that 100 Malaysian-listed firms have

prepared integrated reports, [37]. Subsequently,

[38], announced that in 2019, the number of

Malaysian companies adopting integrated reporting

had increased to 105. Consequently, Malaysia has

aligned itself with other nations in terms of

regulatory compliance with the IIRF. These nations

include South Africa, China, Singapore, Brazil,

Japan, New Zealand, Luxembourg, India, and the

United Kingdom, [36].

2.3 Integrated Reporting Disclosure Practice

Presently, the global acceptance of integrated

reporting implementation is predominantly regarded

as a voluntary practice, except South Africa and

Brazil, [39]. According to a survey conducted by

KPMG in 2017, there was a significant increase in

the adoption of the IR framework and issuance of

integrated reports by companies across several

nations between 2015 and 2017, despite the

voluntary nature of such disclosures. Meanwhile, a

survey by PwC in 2018 conducted among the top 50

Malaysian listed companies revealed a significant

increase since 2015 in the disclosure of certain key

content elements (particularly risks and

opportunities, governance and strategy, and resource

allocation), indicating greater awareness and

improvement in the quality of information published

in integrated reporting. Furthermore, the Corporate

Governance Monitor 2020 reports an increase in the

number of publicly listed Companies (PLCs)

adopting integrated reporting. According to the [33],

the number of PLCs that implemented integrated

reporting in 2019 was 105, which represents an

increase compared to the 97 PLCs that adopted

integrated reporting in 2018.

In their comparative study spanning South

Africa and Europe, [40], uncovered valuable

insights into the impact of voluntary and mandatory

systems on disclosure practices. They found that

although voluntary systems incline higher levels of

disclosure, mandatory systems are more effective in

steering disclosure. Likewise, in a study by [41], it

was anticipated that the inconsistency in the level of

disclosure may be due to a lack of agreed standards,

including ineffective enforcement mechanisms for

additional reporting guidelines. When it comes to

integrated reporting, companies are allowed to use

judgment to make informed choices, granting

flexibility in their practices.

Currently, in academic research, integrated

reporting topics such as disclosure, practices, and

influential factors have gained large interest.

Notably, researchers have explored the extent of

voluntary integrated reporting disclosure, [42], [43],

[44]. For example, [42], made an index or checklist,

as a means of measurement, based on the IR

Framework to indicate the integrated reporting

disclosure level. The study on the relationship

between integrated reporting and the valuation of

South African companies indicates a positive

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correlation between company valuation and

integrated reporting disclosures. [45], examine the

integrated reporting of the top 50 European

companies in Europe. The results provide evidence

that the disclosure satisfies the requirements of

stakeholders, thereby supporting the legitimacy of

companies.

A study by [44], using content analysis to

investigate the quality of the integrated reporting

disclosure of Italian companies indicates that the

extent of disclosure differs across various corporate

sectors. In addition, the organizational overview and

external environment, risks and opportunities,

strategy and resource allocation, governance, and

performance disclosed the most information. The

level of compliance is low for the business model,

outlook, basis of preparation, and presentation. In a

study of eight companies that track the European

financial sector, [46], examine 2015 annual reports

and provide evidence that performance,

organizational overview and business model,

governance, strategy, and resource allocation were

well disclosed. Similar to [44], the result also

implies that Outlook receives a low level of

disclosure. [47], studied the extent of disclosures in

integrated reporting in Poland and discovered that

high disclosure levels are documented for

organizational overview and external environment,

governance, risks and opportunities, and outlook.

Consistent with earlier studies, [44], [46], this result

also reports the lowest disclosures for business

models and strategy and resource allocation.

Meanwhile, a study by [48], conducted on the top

50 PLCs in Malaysia, revealed that governance and

organizational overview and external environment

are highly disclosed. However, the disclosure levels

were found to be significantly lower for business

model, risk and opportunities, strategies and

resource allocation, basis of preparation and

presentation.

Although integrated reporting in Southeast Asia

is still in its infancy, some governments, notably

Malaysia, Indonesia, and Singapore, have made

noteworthy efforts to put integrated reporting into

practice. Following the release of the IIRC

framework, these countries have already started

their integrated reporting journey, [49], [50], [51].

The researchers developed an integrated reporting

checklist based on the IIRC framework in their

investigations, wherein a sample of Malaysian and

Singaporean PLCs was examined. The objective

was to assess the presence of integrated reporting-

related elements within the annual reports of these

businesses. They discovered that some integrated

reporting elements are present in the annual reports

of both countries' companies; however, each country

focuses on different integrated reporting elements.

A study conducted by [52], indicates that the

size of a company in Malaysia has a significant

influence on the extent of integrated reporting

practices in Malaysia. In addition, the study

conducted by [53], revealed a positive relationship

between the size of a company and the size of the

audit firm in Malaysian real estate companies. [54],

utilized the IR index as a tool to evaluate the extent

of integrated reporting disclosure across the top 50

Malaysian PLCs over the period from 2012 to 2015.

It has been established that Malaysian PLCs have

recorded a percentage of over 50% for all content

elements. The findings indicated that these

companies need to put in more effort to develop

effective integrated reporting practices.

Finally, the lack of connectivity among the

content elements due to poor narrative flow and the

limited use of diagrams and maps, the presence of

an informative gap in certain content element areas

and an inadequate description of the business model,

and internal auditing, completeness of information,

and limited third-party verification all have an

impact on the level of IR disclosures, [55].

Furthermore, although companies declare the

implementation of the IR Framework,

implementation is only partial. [48], in their study

indicated that there were only six out of 50 PLCs

that had adopted all the eight content elements listed

in the IR Framework. The study suggested that it

may be attributed to the insufficient allocation of

resources necessary for the successful

implementation of integrated reporting within the

organization.

3 Research Method and Design

3.1 Sample Selection

The initial sample of this study comprises the top

100 companies listed on the Main Market of Bursa

Malaysia from 2018 to 2020. This time range was

chosen since the amended MCCG 2017 included

suggestions for encouraging large companies to

implement integrated reporting practices based on

an internationally recognized framework, [56].

Moreover, this period provides the most recent data,

increasing the relevance of the research for the

interested parties. Data related to integrated

reporting is manually collected from multiple

sources of secondary data, which include the annual

reports, integrated reports, and sustainability reports

of the sample companies downloaded. Table 1

shows the sample companies used in this study.

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Table 1. Sample distribution across the sector

Industry

2018

2019

2020

Total

Construction

Consumer Product &

Services

Energy

Financial Services

Health Care

Industrial Product &

Services

Plantation

Property

REIT

Technology

Telecommunications &

Media

Transportation &

Logistic

Utilities

Total

285

3.2 Data Collection

This study employed content analysis as the

research instrument. The technique was chosen to

analyze the quantity and quality of data from

companies that published annual reports by reading

the text in depth and applying appropriate codes to

describe and analyze them, [57], [58], [59]. This

approach has been used in many prior studies for

measuring the quality of disclosure of financial and

non-financial information, [59], [60]. Furthermore,

[61], highlighted that disclosure quality provides a

more realistic picture of disclosure rather than

disclosure quantity because helps users of annual

reports make rational decisions. In this respect, all

narrative sections of the annual reports and stand-

alone reports (i.e., chairman’s statement, directors’

report, operating review, discussion, and analysis)

were examined.

This study adopted an integrated reporting score

established by [42] and known as IRSCORE to

calculate the IR disclosure quality score. Due to the

absence of theoretical guidance on how to measure

integrated reporting disclosure on how to weigh in

generating an aggregated integrated reporting score,

a multidimensional index was developed based on

the IIRF, comprising the framework’s content

elements to determine the integrated reporting

disclosure level. Hence, this study follows, [42],

who construct a composite IR index by assigning

equal importance (and thus equal weights) to each

of the eight content element items in the IR

Framework. Specifically, the variable IRSCORE is

the equally weighted average of the following

content elements for each company and each year in

this sample: (1) Organizational overview and

external environment; (2) Governance; (3) Business

model; (4) Risks and opportunities; (5) Strategy and

resource allocation; (6) Performance; (7) Outlook;

and (8) Basis of preparation and presentation. As

detailed in Table 2 (Appendix), each content

element comprises sub-elements to assess the

quality of the IR disclosure.

A raw score ranging from 0 (non-compliance

with the IR> framework) to 5 (high conformance

with the IR> framework) is assigned to each

question. If a company has no or little information

on a question in an element in the annual report,

then the question would obtain a score of 0. On the

other hand, if information related to a question of an

element is extensive, then the question would have a

score of 5. Based on the scoring procedures, the

minimum IRSCORE is 0 and the maximum

IRSCORE is 200. In other words, if a company

receives a score of 5 for all queries in all elements,

its total score is 200. Similarly, if a company does

not provide any integrated reporting-related

information in any of the queries or elements, the

company will receive a score of 0. Hence, a higher

IRSCORE indicates higher quality integrated

reporting by the IR framework and guiding

principles. The weight of each content element’s

score is summarized in Table 3.

Table 3. Weight score for content elements

Item

Major Content Element

The Weight of

Each Element

In The Score

CE1

Organizational overview and

external environment

0 - 25

CE2

Governance

0 - 20

CE3

Business Model

0 - 25

CE4

Risk and Opportunities

0 - 25

CE5

Strategy and Resource

Allocation

0 - 20

CE6

Performance

0 - 30

CE7

Future Outlook

0 - 25

CE8

Basis of preparation and

presentation

0 - 30

Total

200

4 Result and Analysis

The results of the present study are presented in

Table 4, Table 5, Table 6, Table 7, Table 8, Table 9,

Table 10, Table 11 and Table 12. The tables'

objective is to facilitate the analysis of content

element disclosure by categories and items.

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4.1 Content Element Analysis by Categories

Table 4 and Table 5 provide a detailed breakdown

of each content element score developed along with

their minimum, maximum, and mean scores

obtained. Companies that included nearly all

required content elements for an integrated reporting

framework in their annual reports contributed to the

high reporting scores. The analysis revealed that the

IR content element with the highest average

disclosure score is the CE2-Governance disclosure

content element, resulting in the highest mean score

of 18.723%. Comparatively, the lowest average

disclosure percentage score is CE7-Future Outlook

with a mean score of 13.206%. This suggests that

sample PLCs place less emphasis on CE7-Future

outlook disclosure. In general, all content elements

received disclosure scores that were above average.

Table 4. Descriptive statistics for individual IR content elements score

Content Element

Min

Max

Mean

CE1

Organizational overview and external environment

285

5.00

25.00

14.9649

4.95122

CE2

Governance

285

14.00

25.00

18.7228

4.53201

CE3

Business Model

285

4.17

25.00

14.7924

7.25293

CE4

Risk and Opportunities

285

1.25

25.00

14.4474

7.13547

CE5

Strategy and Resource Allocation

285

8.00

25.00

14.9789

6.01110

CE6

Performance

285

9.00

25.00

15.0702

6.15658

CE7

Future Outlook

285

5.00

25.00

13.2061

6.66577

CE8

Basis of preparation and presentation

285

7.00

25.00

15.5684

6.55580

Table 5. The Average Content Element for the Year 2018-2020

Table 6. Average Score of CE1-Organisational overview and external environment score

Content Element

2018

2019

2020

CE1

Organizational overview and external environment

CE1.1

Purpose, mission, and vision statement

1.947

2.079

2.211

CE1.2

Ownership and operating structure

3.035

3.096

3.211

CE1.3

Principal activities, competitive and market positioning

2.781

2.877

3.053

CE1.4

Quantitative information

2.842

2.912

3.035

CE1.5

Significant factors affecting the external environment

1.719

1.921

2.096

CE1.6

Environmental challenges

1.789

2.009

2.228

14.114

14.895

15.833

Content Element

2018

2019

2020

Min

Max

Mean

Min

Max

Mean

Min

Max

Mean

CE1

Organizational overview

and external environment

5.00

22.50

14.1491

5.00

24.17

14.8947

6.67

25.00

15.8509

CE2

Governance

14.00

25.00

17.9684

14.00

25.00

18.6737

14.00

25.00

19.5263

CE3

Business Model

4.17

25.00

13.4825

4.17

25.00

14.6842

4.17

25.00

16.2105

CE4

Risk and Opportunities

1.25

25.00

12.8816

1.25

25.00

14.3158

3.75

25.00

16.1447

CE5

Strategy and Resource

Allocation

8.00

25.00

13.8526

8.00

25.00

14.8526

8.00

25.00

16.2316

CE6

Performance

9.00

25.00

14.1053

9.00

25.00

15.0105

9.00

25.00

16.0947

CE7

Future Outlook

5.00

25.00

12.0658

5.00

25.00

13.3026

5.00

25.00

14.2500

CE8

Basis of preparation and

presentation

7.00

25.00

14.1158

7.00

25.00

15.5053

7.00

25.00

17.0842

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CE8-Basis of preparation received the second

highest average mean score with 15.568%, followed

by CE6-Performance with a mean score of 15.070%

and CE5-Strategy and resource allocation with a

mean score of 14.97%. Moreover, the findings

revealed that the remaining content elements,

namely CE-Organizational overview and external

environment, CE3-Business model, and CE4-Risks

and opportunities, all received above-average scores

in the range of 14.447% to 14.4.792%.

The CE2-Governance obtained the highest

overall content element score, which implies that IR

and corporate governance practices are closely

related. Besides, governance is the most commonly

reported content element, which is not surprising

given that this element existed before the

establishment of ISO 26000 and GRI G4, [48].

Furthermore, good governance is heavily

emphasized in Malaysian corporate reporting. As a

result, governance appears to be thoroughly

disclosed in the majority of Malaysian PLC annual

reports.

In contrast, the CE7-Future Outlook with the

lowest mean score indicated that companies do not

invest much time in the disclosure of this content

element. This result is consistent with that of [24],

who also discovered that the level of disclosure for

this content element has the lowest score.

Companies may refrain from disclosing forward-

looking information out of concern for the potential

adverse impact such disclosures could have on their

competitive position, [62]. For example, disclosing

forward-looking information may increase indirect

costs associated with the sharing of proprietary

information that competitors could use, [63].

Table 5 shows the breakdown of individual

average content element scores from Y2018 to

Y2020. The increased average mean scores for all

content elements indicate that the majority of

companies that adopted integrated reporting

improved disclosures compared to reports that were

initially published in 2018. This finding implies that

many publicly traded companies have included IR

in their annual reports as a result of the Malaysian

Corporate Governance Code, which was introduced

in 2017 by the Securities Commission Malaysia.

This result is consistent with the findings of [64],

who discovered a significant increase in voluntary

disclosure after the implementation of the Malaysian

regulatory framework. It is possible to conclude that

the majority of the companies provided integrated

reports with above-average evaluation of content

elements.

CE2-Governance had the highest IR content

element score for all three years, showing a

significant increase in CE2-Governance disclosure.

On contrary, CE7-Future outlook obtained the

lowest score in each of the three years, indicating

the need for significant improvements to this

content area. This also implies that the low overall

result score was caused by companies that did not

use standard IR frameworks in their annual reports

in a given year. In contrast, the slightly above-

average scores indicate that companies that have

adopted IR do not include sufficient relevant

information in their published reports. It could be

presumed that companies disregard some of the

information and do not strictly adhere to the IR

framework. Overall, most companies have partial

compliance with the requirements of the IR

Framework about most of the content elements.

4.2 Content Element Analysis by Items

This section provides a comprehensive analysis of

each of the content element scores. The objective is

to analyze each category of content element

disclosures in the annual reports. It displays the

proportion of content element items with the

average IR disclosure scores for each category. The

average score indicates that the coverage and trend

of IR disclosures under each category vary based on

the IR disclosure checklist scores. A raw score

ranging from 0 (non-compliance with the IR>

framework) to 5 (high conformance with the IR>

framework) is assigned to each subcategory. If a

company has no or little information on a question

in an element in the annual report, then the question

would obtain a score of 0. On the other hand, if

information related to a question of an element is

extensive, then the question would have a score of

Disclosure of CE1-Organisational overview and

external environment

Table 6 provides a summary of the average score for

the subcategories of CE1-Organisational overview

and external environment content element evaluated

using selected checklist changes in the 2018-2020

period.

Most companies disclosed information about

their ownership and operating structure and

quantitative information and received excellent

scores for these sub-content elements. In addition,

good scores were received for disclosing their

principal activities about employees, revenues,

locations, and changes. Since the majority of this

information is usually available in financial

statements, it could be presumed that collecting and

disclosing it is relatively simple for companies.

However, based on the average scores, not all major

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companies have clearly defined values, missions,

and visions, as well as other business cultural

aspects that are included in the integrated reporting.

As a result, stakeholders - such as investors and the

public - may struggle to grasp the company's

strategic direction and overall purpose. Furthermore,

the scores for significant external environment

factors and environmental challenges were the

lowest, indicating that the majority of the companies

do not provide market and external environment-

related information. The absence of transparency of

this information can be worrisome for stakeholders

who heavily rely on this information to evaluate a

company's ability to weather changing external

circumstances with flexibility and success.

Disclosure of CE2-Governance

Changes in governance content element scores are

illustrated in Table 7. CE2-Governance content

elements all received above-average scores and the

highest score rating. The majority of companies

disclosed their board of directors' list, experience,

and skills in leadership structure, and the majority of

them also presented compensation policies in

remuneration, incentives, and value creation, as well

as procedures for strategic decisions, risk, and

integrity.

Table 7. Average Score of CE2-Governance

Content Element

2018

2019

2020

CE2

Governance

CE2.1

Leadership structure

3.705

3.821

4.000

CE2.2

Specific procedures for strategic decision, risk, and integrity

3.642

3.768

3.947

CE2.3

Organization’s culture, ethics, and values

3.242

3.453

3.684

CE2.4

Promoting & enabling innovation

3.505

3.663

3.874

CE2.5

The link between remuneration, incentives, and value creation

3.874

3.979

4.147

17.968

18.684

19.653

Table 8. Average Score of CE3-Business Model

Content Element

2018

2019

2020

CE3

Business Model

CE3.1

Business model description

2.553

2.693

2.904

CE3.2

Inputs relate to the capital

1.614

1.939

2.325

CE3.3

Outputs relate to products and services

1.930

2.246

2.561

CE3.4

The link between other elements

1.868

2.070

2.351

CE3.5

Identification of stakeholders and other dependents

3.044

3.175

3.298

CE3.6

Position within the entire value chain

2.421

2.561

2.749

13.430

14.684

16.187

Table 9. Average Score of CE4- Risk and Opportunities

Content Element

2018

2019

2020

CE4

Risk and opportunities

CE4.1

Specific key risks and opportunities

3.145

3.539

4.013

CE4.2

Specific sources risks and opportunities

3.066

3.474

3.947

CE4.3

Assess the probability of opportunity and risks arise

3.474

3.750

4.197

CE4.4

Specific actions to mitigate or manage key risks

3.197

3.553

3.987

12.882

14.316

16.145

Table 10. Average score of CE5- Strategy and Resource allocation

Content Element

2018

2019

2020

CE5

Strategy and resource allocation

CE5.1

Short, medium, and long-term objectives

2.484

2.716

2.958

CE5.2

Strategies to implement

2.726

2.968

3.263

CE5.3

Resource allocation plans

3.063

3.189

3.432

CE5.4

Measurement achievements

2.874

3.053

3.326

CE5.5

Competitive advantage for value creation

2.705

2.926

3.253

13.853

14.853

16.232

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According to [65], higher governance disclosure

conveys more integrity and ethics information, as

well as a clearer message and detailed procedure,

providing stakeholders with a comprehensive

understanding of the current governance status of

the company. Hence, the majority of the companies

disclosed their board of directors' list, experience,

and skills in leadership structure, and the majority of

them also presented compensation policies in

remuneration, incentives, and value creation, as well

as procedures for strategic decisions, risk, and

integrity. Despite this, the culture, ethics, and values

of the organization resulted the lowest score for this

area, demonstrating that a significant part of

organizations does not include this type of

information in their IR. The information presented is

frequently unrelated to capital’s capital and/or the

value creation process. Mostly, it is presented in a

traditional way and by accounting rules and

governance codes.

Disclosure of CE3-Business Model

Table 8 illustrates the change in business model

scores throughout the period. According to the

average score, the most disclosed item regarding a

business model is the identification of stakeholders

and other dependents. It can be inferred that, in

general, companies are quite open about

acknowledging and honoring the entities or groups

that are impacted or reliant on their business

operations. It is followed by a description of the

business model and its position within the entire

value chain. It is quite clear that companies are

pleased to disclose details about their fundamental

framework and positioning within the bigger picture

of value creation. Meanwhile, the majority of

companies did not explain how their inputs relate to

capital and how their outputs relate to products and

services, and they only provided a limited amount of

information about the relationship between the

business model and other content elements like

strategy, risks, and opportunities, and performance.

This lack of clarity could impede stakeholders from

fully comprehending the company's resource

allocation and the connection between its operations

and its end products or services. Surprisingly, no

company discloses all business model elements.

Therefore, the rating score is lower.

Disclosure of CE4-Risks and Opportunities

Table 9 shows how scores of risks and opportunities

content elements change throughout the period.

A score above average for all individual content

element items indicates that the majority of

companies complied with all integrated reporting

guidelines for the risks and opportunities content

element. However, it was discovered that the

majority of companies prefer to disclose risks over

opportunities. In most cases, companies disclosed a

list of risks according to the accounting rules and

not a discussion of the opportunities of the

company. As a result, companies are unable to

determine the likelihood and possible effects of both

risks and opportunities. In contrast, they may

withhold information regarding opportunities that

could attract additional competitors or hurt the

firms' competitive advantages. However, it is argued

that companies are not required to disclose

information that might negatively affect their

competitive position. Consequently, companies may

be reluctant to reveal sensitive information or

information that would diminish their competitive

advantage.

Disclosure of CE5- Strategy and Resource

Allocation

From Table 10, companies improved the score

disclosure on all items for strategy and resource

allocation content elements. Nevertheless, the

findings discovered that 80% of the sample

companies disclosed the CE5-Strategy and resource

allocation content element without a specific time

frame. The content element disclosure is mostly a

clear description of the strategy without any

connection with the capital (resource allocation). In

addition, some companies eliminate this information

in their annual report, hence, resulting in the lowest

average score for this item.

Disclosure of CE6- Performance

The CE6 - performance revealed that the majority of

companies that adopted IR disclosed quantitative

indicators, the state of key stakeholders'

relationships, linkages between past and current

performance, and performance indicators. The

financial implications of significant effects on

capital are the least disclosed items in this category.

The lowest average score for capital effects

indicates that the majority of companies eliminated

this information. Table 11 presents the average

score change throughout the period.

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Table 11. Average score of CE6- Performance

Content Element

2018

2019

2020

CE6

Performance

CE6.1

Quantitative indicators

3.053

3.242

3.432

CE6.2

Effects on capitals

1.600

1.853

2.179

CE6.3

Key stakeholder relationships

3.568

3.726

3.905

CE6.4

Linkages between past and current performance

2.863

3.042

3.211

CE6.5

Performance indicators

2.989

3.147

3.368

14.074

15.011

16.095

Table 12. Average score of CE7- Future Outlook

Content Element

2018

2019

2020

CE7

Future outlook

CE7.1

Challenges and uncertainties

3.000

3.289

3.539

CE7.2

Potential implications

2.632

2.974

3.224

CE7.3

Availability and affordability of capital

3.645

3.921

4.105

CE7.4

Potential effects on future performance

2.789

3.118

3.382

12.066

13.303

14.250

Table 13. Average score of CE8- Basis of Preparation and Presentation

Content Element

2018

2019

2020

CE8

Basis of preparation and presentation

CE8.1

Materiality determination

3.000

3.221

3.495

CE8.2

Reporting boundary

1.358

1.884

2.400

CE8.3

Significant framework and methods

1.821

2.221

2.716

CE8.4

Compliance with governance rules

4.116

4.189

4.368

CE8.5

Disclosure of key information and material

3.821

3.989

4.105

14.116

15.505

17.084

Disclosure of CE7- Future Outlook

The average score change for CE7-Future outlook

throughout the period is presented in Table 12. It

showed that companies that used IR were the most

open about how much capital was available and how

much it would cost, as well as about challenges and

uncertainties. On average, potential implications and

effects on future performance are low, but the score

is slightly rising over time. Most companies were

reluctant to reveal company-specific risks and

expectations, thus the disclosures are generic.

Moreover, because of future uncertainties, it may be

difficult to accurately predict the future performance

of a company, [66]. The potential inaccuracy of

future projections decreases the incentives of

companies to disclose more forward-looking

information because of litigation costs, [67], [68].

Additionally, it might be assumed that current

corporate reports disregarded future outlook and

instead concentrated on short-term success and

backward-looking information. This supports the

finding established by [69], who discovered that

traditional company reports primarily include

backward-looking information rather than forward-

looking.

Disclosure of CE8- Basis of Preparation and

Presentation

Table 13 shows the average score change for CE8-

Basis outlook throughout the period CE8 - basis of

preparation received the highest average score from

compliance with governance rules, disclosure of key

information, and materiality determination. In

contrast, the significant framework and

methodologies received the lowest rating score. It

was discovered that the majority of IR does not have

a defined reporting boundary. Furthermore,

reporting boundaries are frequently determined

without any explanation of the method. Despite the

absence of frameworks and methods in most reports,

all annual reports were audited.

Based on the analysis presented above, it can be

concluded that most companies that adopted internal

reporting (IR) enhanced disclosures compared to

reports that were initially published in 2018. The

scores are slightly above average, which means that

companies that have adopted IR do not include

enough relevant information in their published

reports. It could be assumed that the companies do

not strictly adhere to the IR framework and

disregard some of the information.

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5 Conclusion

Integrated reporting is a comprehensive approach to

corporate reporting that goes beyond traditional

financial reporting. It seeks to provide a more

holistic view of a company's performance,

incorporating both financial and non-financial

information. Integrated reporting is used by

companies to communicate their performance to

stakeholders, including investors, regulators, and the

public. It helps companies make informed decisions

about their business strategies, risk management,

and sustainability efforts. It also aids investors in

evaluating a company's long-term prospects and

alignment with their own ESG goals.

Several research has been conducted to evaluate

Malaysian companies' adherence to IIRC framework

content elements; however, few studies have been

conducted in connection to disclosure level practice

This study used quantitative analysis to evaluate the

level of disclosure in each content element, while

the qualitative analysis involved assessing the

clarity, relevance, and completeness of the

information provided. The IR disclosure by

Malaysian top public listed companies is

encouraging and the trend is increasing. Even

though IR disclosure is still voluntary, companies

are making an effort to make some disclosures.

Disclosure on governance is the most reported

element. Specifically, companies most reported on

the link between remuneration, incentives, and value

creation. It provides transparency into the

company's executive compensation practices,

allowing shareholders and the public to evaluate

whether these practices are fair and justifiable. This

transparency helps in building trust and credibility.

In practice, integrated reporting encourages

companies to embed sustainability and responsible

governance into their core business operations. It

can lead to improved risk management, enhanced

stakeholder relationships, and better resource

allocation. Companies that embrace integrated

reporting are often better positioned to adapt to

changing market dynamics and investor preferences.

This study is not without its limitations. First, the

quality of integrated reports can vary significantly

among companies. Some reports may lack the depth

and detail needed for a comprehensive analysis.

Assessing the reliability and accuracy of the

information presented in these reports can be

challenging. Second, the findings of this study

cannot be generalized since it used the Malaysian

context. Other countries may have different levels of

IR disclosure due to cultural, regulatory, or

industry-specific differences. Future research could

compare integrated reporting practices in Malaysia

with those in other countries or regions, particularly

in Southeast Asia or emerging economies. This

could highlight similarities, differences, and

potential factors influencing reporting practices.

Acknowledgement:

The authors would like to express appreciation to

Universiti Teknologi MARA, Selangor, Malaysia

for funding this research project under the SRP

research grant (File No.: 100-RMC 5/3/SRP

(063/2021)). The authors also would like to express

gratitude to the Faculty of Accountancy, Universiti

Teknologi MARA, Cawangan Selangor, Kampus

Puncak Alam, Malaysia for facilitating this research.

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APPENDIX

Table 2. Integrated reporting score sheet elements

Item

<IR> Major Content

Element

Elements

Organizational overview

and external environment

1.1 The organization’s purpose, mission, vision, culture, ethics, and values.

1.2 The organization’s ownership and operating structure.

1.3 The organization’s principal activities, products, services, markets, competitive

landscape, and market positioning.

1.4 Quantitative information such as the number of employees in which the

organization operates, the number of revenues in which the organization operates,

and the number of countries in which the organization operates.

1.5 Significant factors affecting the external environment.

Environmental challenges such as economic stability, technological changes,

globalization and industry trends, market forces, societal issues, and political and

regulatory environment.

Governance

2.1 The leadership structure of the organization including the skills and diversity.

2.2 The specific procedures used in making strategic decisions, risk management,

and addressing of ethical and integrity issues.

2.3 Reflects the organization’s culture, ethics, and values and the effect of capital

including relationships with stakeholders.

2.4 The responsibility for promoting and enabling innovation.

2.5 The link between remuneration and incentives and value creation.

Business Model

3.1 The organization’s business model description

3.2 Key inputs relate to the capital on which the organization depends.

3.3 Key outputs relate to products and services.

3.4 The link between the business model to other content elements such as strategy,

risks and opportunities, and performance.

3.5 Identification of the stakeholders and other dependents.

3.6 The organization’s position within the entire value chain.

Risk and Opportunities

4.1 The key risks and opportunities that are specific to the organization, including

strategic, supply chain, political, financial, human resource, environmental,

information technology, and reputation in the short, medium, and long term.

4.2 The specific sources of risks and opportunities.

4.3 Assess the probability that an opportunity or risk will arise and the extent of its

effect.

4.4 The specific action steps organizations take to mitigate or manage key risks or

create value from opportunities.

Strategy and Resource

Allocation

5.1. The organization’s short, medium, and long-term strategic objectives.

5.2. The strategies it has in place or intends to implement, to achieve those strategic

objectives.

5.3. The resource allocation plans it has to implement its strategy.

5.4. How it will measure achievements and target outcomes for the short, medium, and

long term.

5.5. The competitive advantage of the organization that enables it to create value in the

future.

Performance

6.1. Quantitative indicators concerning targets, risks, and opportunities, explaining

their significance, their implications, and the methods and assumptions used in

compiling them.

6.2. The organization’s effects (both positive and negative) on the capitals, including

material effects on capitals up and down the value chain.

6.3. The state of key stakeholder relationships and how the organization has

responded to key stakeholders’ legitimate needs and interests.

6.4. The linkages between past and current performance, and between current

performance and the organization’s outlook.

6.5. Key performance indicators that combine financial measures with other

components.

Future Outlook

7.1. Challenges and uncertainties the organization encounters in pursuing its strategy.

7.2. Potential implications for the organization’s business model and future

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Item

<IR> Major Content

Element

Elements

performance.

7.3. The availability and affordability of capital the organization uses (e.g., skilled

labour and natural resources).

7.4. The potential effects on future performance and business model of the

organization.

Basis of preparation and

presentation

8.1 The organization’s materiality determination.

8.2 The reporting boundary.

8.3 The significant frameworks and methods.

8.4 Compliance with the rules of governance.

8.5 Disclosure of key information and material.

Contribution of Individual Authors to the

Creation of a Scientific Article (Ghostwriting

Policy)

- Mazurina Mohd Ali, and Susi Handayani carried

out the conceptualization, funding acquisition,

investigation, supervision, and writing - the

original draft.

- Erlane K Ghani, has implemented the

methodology, formal analysis.

- Mariana, and Hantantri have organized resources.

- Mazurina Mohd Ali has done the writing – review

& editing.

Sources of Funding for Research Presented in a

Scientific Article or Scientific Article Itself

Funding was received from Universiti Teknologi

MARA under an SRP research grant (File No.: 100-

RMC 5/3/SRP (063/2021)).

Conflict of Interest

The authors have no conflicts of interest to declare.

Creative Commons Attribution License 4.0

(Attribution 4.0 International, CC BY 4.0)

This article is published under the terms of the

Creative Commons Attribution License 4.0

https://creativecommons.org/licenses/by/4.0/deed.en

_US

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